Shoals Technologies Group's Q1 2025: Key Contradictions in BESS Strategy, Margins, and Labor Challenges

BESS market strategy and opportunities, gross margin expectations, labor and skilled labor challenges, project delays and visibility, book-to-bill ratio are the key contradictions discussed in Shoals Technologies Group's latest 2025Q1 earnings call.



Revenue and Bookings Performance:
- Shoals Technologies Group reported revenue of $80.4 million in Q1, exceeding the high end of their expected range.
- The company achieved strong new bookings, with approximately $91 million in new orders, resulting in a book-to-bill ratio of 1.13.
- The growth was driven by demand for utility-scale solar solutions and strategic pricing initiatives.

Gross Margin Dynamics:
- Adjusted gross profit percentage was softer than usual at 35%, driven by product mix, strategic pricing, and reduced fixed cost leverage.
- The company expects gross margins to improve to the mid to high 30% range for the next quarters and to achieve 40%-plus margins in the long run.
- The temporary dip in margins was due to product mix and strategic pricing actions to engage with customers.

International Expansion and Contract Wins:
- Shoals signed a memorandum of understanding with UGT Renewables and Sun Africa for 12 gigawatts of international solar power projects.
- These projects require domestic content, leveraging Shoals' U.S. manufacturing capabilities.
- The company is strategically positioning itself in international markets with solutions that mitigate skilled labor needs.

Battery Energy Storage Growth:
- Shoals is expanding into the battery energy storage (BESS) market, with multiple channels for market penetration, including solar EPCs, OEM partnerships, and industrial projects.
- The company is seeing strong interest and bookings in this market, driven by demand for energy storage solutions.
- The BESS business is expected to materially impact Shoals' product mix and customer base in the coming years.